Avoid Land Grabs while Downsizing Detroit

Avoid Land Grabs while Downsizing Detroit

March 09, 2010
Originally published in The Detroit News

If history is any guide, Mayor Dave Bing’s recent announcement that he intends to pursue aggressive central planning to shrink Detroit is bad news. For a city notorious for eminent domain abuse and corruption, Detroit residents should be vigilant about Bing’s plan.

The reason that the mayor wants to downsize the city is understandable. Many people and businesses have departed, leaving huge swaths of the city where the city provides police, fire and garbage services for very few residents. By forcing some residents to move, the city can consolidate neighborhoods, save money as well as put together coherent tracts of property for sale to potential developers.

But many of the areas in question are sparsely populated by mostly low-income residents or dilapidated to the point where the city has a reasonable case designating the properties as public nuisances. Because of these two facts, the city should neither forgo the normal bargaining process nor condemn the dilapidated parcels through eminent domain.

Normal bargaining to buy property would likely be relatively cheap given the small, lower-income population. And if property is truly blighted, it would be a public nuisance and could be seized through traditional police authority granted to government without using eminent domain—and without compensating the owners at all.

Detroit residents are more protected than many Americans from eminent domain abuse, but they are by no means immune. Bing and city government may face constraints on manipulating takings compensation settlements, but there are still opportunities for abuse.

Officials have strong incentives to systematically undervalue property when determining “market value.” Even if the city were to pay 125 percent of “market value” plus additional relocation costs, as required by the state Constitution, the odds of the owner getting anywhere close to the property’s actual subjective value—the price at which the owner would willingly sell—are slim.

The law ought to reflect the reality that officials cannot know how much owners value their property, which is what makes the bargaining process superior to takings in the first place.

But Detroiters aren’t alone; eminent domain abuse remains a serious problem across the nation.

Five years ago in its Kelo v. New London ruling, the U.S. Supreme Court upheld the city of New London, Conn.’s authority to condemn homes to transfer the parcels to a wealthy private developer. The Takings Clause of the Fifth Amendment to the U.S. Constitution—“nor shall private property be taken for public use, without just compensation”—was interpreted to permit property seizures for a “public purpose”—in this case, the city’s expected increase in tax revenue following redevelopment.

Many were outraged that homeownership had essentially been rendered meaningless in the name of corporate welfare. According to polls, nearly 90 percent of Americans opposed the decision.

Moreover, the entire takings process tends to be heavily biased against lower-income businesses and households. Poorer areas are far more likely to be declared “blighted” for spurious reasons and targeted for economic redevelopment, so eminent domain takings can kill off wealth creation there before it even begins.

A classic example is the razing of Detroit’s Poletown neighborhood. Then-Mayor Coleman Young conspired with General Motors to seize and demolish historic working-class Poletown to build a new auto plant. In addition to the 1,300 homes and six churches slated for destruction, 140 businesses stood in the way of this unholy alliance of government and big business.

Neighborhood groups filed lawsuits, staged sit-ins and held rallies to oppose the development plan. In the end, this was not enough, the Michigan Supreme Court gave Young and GM the victory they needed, and the once-thriving immigrant neighborhood was soon demolished.

Thankfully, the Michigan Supreme Court later reversed its decision. The Poletown plant is still in operation, but the vast majority of the razed property now consists of parking lots and green space.

And thanks to the passage of a 2006 ballot initiative, Michigan residents now enjoy some of the strongest protections against eminent domain abuse in the nation.

Detroit city government already has a bad reputation from its past land grabs. That’s why Bing and other Detroit officials should pursue downsizing through normal parcel purchases instead of politically charged land takings.